Why did the correlation between oil prices and 10-year TIPS Break-even Inflation, a measure of long-term inflation compensation, increase dramatically after the financial crisis? Using a shadow-rate no-arbitrage term structure model, we demonstrate that this is because when nominal interest...

We propose a new model to decompose inflation swaps into genuine inflation expectations and risk premiums. We develop a no-arbitrage term structure model with stochastic endpoints, separating macroeconomic variables into transitory parts and long-run, economically grounded determinants, such as...